According to Meridian-IQ, the total number of registered investment adviser (RIA) firms grew by approximately 2.4% from 2013 to 2014. As of May 2014, Meridian-IQ estimates that there are 31,739 total RIA firms actively registered compared to 30,995 firms in May 2013 (a net increase of 744 firms). Here, at RIA in a Box, we continue to see small and large RIA firms flourish not only due to the rise of the equity markets, but also due to access to better industry infrastructure allowing firms of all sizes to grow faster and more profitably. We believe this growth in RIA firms will only accelerate as more advisers and clients recognize the benefits of the investment adviser model.
Consolidation is Dwarfed by the Number of New RIA Firms Started
While many industry analysts continue to predict increased RIA industry consolidation, the actual figures continue to point otherwise as more and more new RIA firms are being started each year. Schwab Advisor Services reports that there were 54 completed merger and acquisitions of investment advisory firms in 2013. With approximately 31,000 total registered investment adviser firms, that translates to a .17% annual consolidation rate in the industry. In other words, for every one RIA firm acquired in 2013, there were close to 14 new firms started (54 acquisitions compared to a net increase of 744 total firms from 2013 to 2014.
However, in reality, it’s quite a bit more than 14 new firms started per acquisition as the net increase of firms understates the gross number of new RIA firms started from May 2013 to May 2014 which was reported to be 2,280. Compared to the 2,280 new firms started, there were just over 42 firms started per each acquisition.
How Many RIA Firms Went Out Business?
Given that ~2,280 new RIA firms were started from May 2013 to May 2014, we can estimate how many investment adviser firms went out of business over that same time period. Assuming once again that 54 acquisitions took place over that 12-month period, it would appear that ~1,482 firms went out of business without being acquired from May 2013 to May 2014 (2280-54-744=1,482). If we once again assume 31,000 RIA firms in total, this translates to 4.8% of all investment advisory firms.
Some Smaller States Are Experiencing Rapid Growth in the Number of RIA Firms
The top 5 fastest-growing states from 2013 to 2014 including both state and SEC-registered firms based in that state were:
| State | Number of RIA Firms (2013) | Number of RIA Firms (2014) | Growth (#) | Growth (%) |
| 1) Hawaii | 52 | 73 | 21 | 40.4% |
| 2) Utah | 193 | 243 | 50 | 25.9% |
| 3) Nevada | 139 | 170 | 31 | 22.3% |
| 4) New Mexico | 74 | 88 | 14 | 18.9% |
| 5) Idaho | 75 | 88 | 14 | 17.3% |
The Largest States Still Are Home to a Significant Portion of All RIA Firms
In 2013, the top 5 largest states by number of RIA firms (including both state and SEC-registered firms) were:
| State | Number of RIA Firms (2013) |
| 1) California | 4,511 |
| 2) New York | 3,247 |
| 3) Texas | 1,736 |
| 4) Florida | 1,312 |
| 5t) Illinois | 1,304 |
| 5t) Massachusetts | 1,304 |
In 2014, the top 5 largest states by number of RIA firms (including both state and SEC-registered firms) are:
| State | Number of RIA Firms (2014) |
| 1) California | 5,025 |
| 2) New York | 3,435 |
| 3) Texas | 1,936 |
| 4) Massachusetts | 1,425 |
| 5) Florida | 1,412 |
Comparing 2014 to 2013, the top 5 states remained relatively unchanged with the key exception being the rise of Massachusetts and the fall of Illinois out of the top 5. The total number of investment advisory firms based in Illinois grew 3.6% from 2013 to 2014 (an increase of 44 firms). In comparison, the total number of investment advisory firms based in Massachusetts grew by 9.3% from 2013 to 2014 (an increase of 121 firms). California remained on top with an impressive annual growth rate of 11.4%.
Looking at the Top States in Terms of RIA Firms Per Person
One would expect the largest states to be home to a significant percentage of the total number of investment advisory firms, so it’s also interesting to look at the top states in terms of density. Density is measured as the number of individuals per RIA firm in a given state. Utilizing data from the United States Census Bureau the top 5 most dense states in terms of number of firms in 2014 are:
| State | Number of RIA Firms (2014) | Est. Population | Population Density (Residents Per RIA Firm) |
| 1) Connecticut | 936 | 3,510,297 | 3,750 |
| 2) Massachusetts | 1,425 | 6,398,743 | 4,490 |
| 3) Colorado | 880 | 4,665,177 | 5,301 |
| 4) New York | 3,435 | 19,254,630 | 5,605 |
| 5) New Hampshire | 200 | 1,309,940 | 6,550 |
Interestingly enough, despite large numbers of RIA firms, both Florida and Texas, have relatively low density figures. Florida currently has 1 firm per every 12,599 people and Texas has 1 firm per every 11,808 people. Of course, density can be a bit misleading as a good portion of the investment advisory firms in a given state also service clients out of state.
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